Illustration: Sarah Grillo/Axios – The Value of Mid-Size Fintech Acquisitions for Venture Capital Firms

Restive Ventures, a fintech-focused venture capital firm, is shaking up the traditional narrative in the world of venture capital. According to a new data report, the firm is urging other VC firms to consider smaller acquisitions in the range of $300 to $400 million in order to maximize returns.

In an interview with Axios, Restive Ventures partner Cameron Peake emphasized the importance of not solely focusing on blockbuster IPOs. Peake highlighted that for funds of the right size and structure, smaller merger and acquisition deals can unlock significant returns.

The fintech sector, in particular, has seen a surge in large M&A deals compared to IPOs, with transactions averaging around $403 million since 2018. Peake pointed out that raising too much capital at a high valuation could potentially put these acquisition opportunities out of reach for some companies.

One success story that Peake mentioned was portfolio company Power Finance, which was acquired by Marqeta for $275 million after raising only $16 million in total funding. This example illustrates how smaller deals can still result in great investment returns.

Despite the appeal of billion-dollar exits, Sheel Mohnot, a general partner at Better Tomorrow Ventures, acknowledges the benefits of smaller acquisitions in terms of returning capital to limited partners sooner. He predicts that there will be more fintech IPOs or private equity exits in the future as regulatory environments may impact acquisition opportunities.

Overall, Restive Ventures’ data report serves as a reminder to the VC community that sometimes, less can indeed be more when it comes to maximizing returns in the fintech sector.